There is a great post written by Emiel Jongerius who describes a walk-through of the steps to perform in order to localize XAML files in Silverlight.
This post is based on Silverlight 4, but all the steps do also apply to Silverlight 3. The full source code of the resulting project can be downloaded here. The language C# is used throughout this post, but the steps are easy translatable to VB.NET.